Home News Analysts warn US housing demand ‘cratered’ as rates ‘ensure’ recession

Analysts warn US housing demand ‘cratered’ as rates ‘ensure’ recession

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Analysts at Raymond James warned in a recent memo to clients that demand in the U.S. housing market had effectively “cratered” as mortgage rates soared to their highest level in decades.

With long-term mortgage rates approaching 7%, prospective homebuyers are pulling out of the housing market. “Surely” a housing recessionthe analyst said.

Homes will become even more affordable as mortgage rates continue to rise in response to the Federal Reserve’s sharp interest rate hikes.

Analysts Buck Horn and Tousley Hyde wrote in an Oct. 21 note that “many anecdotes and indicators (including this week’s NAHB Home Builder Sentiment Index) suggest that the recent parabolic interest rate spike has “It confirms that it has destroyed any remaining housing demand in the market this summer.” to the client.

Mortgage interest rates are approaching 7%.
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“Additionally, with inflation indicators still stubbornly high and the Federal Reserve signaling further rate hikes, we cannot predict when and how credit spreads will begin to normalize,” they added. I was.

The median U.S. household would spend almost 42% of its monthly gross income on mortgage payments at current levels, analysts say. This is a huge number that breaks her previous record of 40% in 2006, just before the housing market crashed.

Analysts at Raymond James lowered stock valuations and lowered earnings targets for all eligible homebuilding-focused companies, including Toll Brothers.

home buyer
Analysts at Raymond James said a housing recession was certain.
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Analysts point to Fed Chairman Jerome Powell and other policymakers’ support for continued rate hikes despite a sharp slowdown in the housing market as a key factor in the market downturn. did.

“The housing sector and home builders must prepare for a Fed-guaranteed hard landing (you win, Jerome) with a much lower absorption rate and downward pressure on new home prices,” they said. added.

Still, analysts noted that “the homebuilding sector is already priced for a sharp housing recession” and is unlikely to perform worse than the broader S&P 500 in the coming months.

home for sale
US house prices are starting to fall in many markets.
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as the post reportedConfidence in home builders plummeted in October for the 10th straight month and to its lowest level since 2012, according to a monthly survey by the National Association of Home Builders.

Ian Shepardson, chief economist at Pantheon Macroeconomics, called the findings “disastrous” and warned that given the current trajectory, U.S. house prices could fall 20% by next year. .

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